Home mortgage rates continue to decline

Santa Claus arrived a little late in the Downey household this year. However, his gift of low home mortgage rates is extremely generous and may continue to benefit our family for some 30 years. My wife and I are in the process of refinancing our mortgage and have just locked in to 30 year fixed loan at 4.875 percent. The rate on our original mortgage from two years ago is 6.25 percent.

To be honest, actions taken by the Federal Reserve and US Treasury, not Santa Claus, are really the cause of these cheap interest rates. Nevertheless, my wife and I are going to take advantage. Our new mortgage will reduce our monthly mortgage payment by over 20 percent per month, or about $375. This is exciting as I am quite cheap.

While refinancing seems so obvious, there are some costs, hassles and considerations. First, it will probably cost somewhere between $2,000 and $3,000 for us to refinance our mortgage. Secondly, the bank is currently doing its best impersonation of the IRS and auditing all of our financial information. This is time consuming and frustrating. The final consideration is the appraisal of our home. We purchased our home two years ago near the height of the housing market with a 20 percent down payment. If the appraisal comes back with a significantly lower value on our home, we may have to pay private mortgage insurance (PMI). However, the reduced mortgage payment will be greater than the cost of PMI.

The current interest rate environment should bring new life back into the housing market. People already in homes can refinance at a lower interest rate. If you are in this category, you should start talking to your local bank or mortgage broker. Additionally, homeownership for first time buyers should be very affordable.